Greek economy slips back into recession in first quarter

ATHENS (Reuters) – Greece’s economy shrank 0.2 percent in the first quarter, slipping back into recession as political turmoil put the brakes on a fragile recovery, data showed on Wednesday.

Greece’s economy emerged from a six-year recession last year, but has struggled in recent months as political turbulence returned towards the end of last year and triggered early elections that brought anti-austerity leftists to power.

The contraction over January to March, based on seasonally adjusted data from the statistics service Elstat, followed a 0.4 percent decline in the final quarter of last year.

That was better than expected, with analysts polled by Reuters forecasting a 0.5 percent contraction in the quarter.

“Greek GDP continued contracting in the first quarter due to a weakening business sentiment amid a protracted period of negotiations between the government and the lender and deteriorating liquidity conditions,” said Nikos Magginas, a senior economist at National Bank of Greece.

He said the third quarter would be decisive for the economy since it coincides with Greece’s busy summer tourism season and a possible deal with EU and IMF lenders.

Prime Minister Alexis Tsipras’s government has been locked for months in talks with lenders on a cash-for-reforms deal.

An agreement has proved elusive and the country needs a deal to unlock aid in weeks to avoid running out of cash.

Greece’s economic boom of the early 2000s ended with the country sinking into recession after the global credit crunch in 2008. A subsequent debt crisis and austerity imposed by international lenders who bailed out the country deepened the recession, wiping out a quarter of the economy over six years.

(Reporting by Angeliki Koutantou and George Georgiopoulos, editing by Deepa Babington and John Stonestreet)